ASSOCIATED GAS UTILISATION IN RUSSIA ABOUT ASSOCIATED Associated petroleum gas (APG) is the gas dissolved in oil fluids, which contains , a common , and natural gas liquids (NGLs) used as fuel or raw materials for deep conversion. Below is the overview PETROLEUM GAS of all APG utilisation methods focusing on the per unit costs, economic benefits and environmental impacts.

HOW IT WORKS

After the extraction of oil fluids, they undergo special treatment to remove all by-products, including water, sulphur and associated gas. Without such treatment, the oil will not be allowed into the OILOIL main oil pipeline due to the technical requirements. Once APG has been separated from the oil, it BLENDBLEND needs to be further utilised or disposed of. It is forbidden to simply release the associated gas into atmosphere, as it is highly inflammable and can even explode. ASSOCIATEDASSOCIATED GASGAS APG UTILISATION IN 2005–2015 (BCM) OILOIL 2005 2015 PUMPPUMP Flaring Deep 13% conversion Flaring 40% 27% Deep Injection into the conversion unified gas transmission network of 41% 10 11% 15

9 23 34 Injection into the unified gas transmission 4 network of Gazprom 12 Reinjection 7% into oil reservoir 6 14% 8 1 Reinjection 6 into oil reservoir 10 10% Simple Power generation conversion 2% Power generation 8% 15% Simple conversion 12% FLARING HOW IT WORKS The easiest way to dispose of associated gas is to build a flare at the oil field and burn the gas off.

METRICS COMPARISON ACROSS UTILISATION METHODS

INJECTION INTO THE UNIFIED GAS FLARING REINJECTION INTO INJECTION INTO THE POWER SIMPLE DEEP UNIFIEDTRANSMISSION GAS REINJECTIONOIL RESERVOIR INTO GENERATION CONVERSION CONVERSION FLARING TRANSMISSIONNETWORK OF POWER SIMPLE DEEP OIL RESERVOIR NETWORKINJECTIONGAZPROM OFINTO THE GENERATION CONVERSION CONVERSION UNIFIED GAS REINJECTION INTO GAZPROM FLARING TRANSMISSION POWER SIMPLE DEEP OIL RESERVOIR NETWORKINJECTION OFINTO THE GENERATION CONVERSION CONVERSION UNIFIED GAS REINJECTION INTO GAZPROM FLARING TRANSMISSION POWER SIMPLE DEEP OIL RESERVOIR GENERATION CONVERSION CONVERSION INJECTIONNETWORK OFINTO THE UNIFIEDGAZPROM GAS REINJECTION INTO CAPEX FLARING TRANSMISSION POWER SIMPLE DEEP 0,1 OIL RESERVOIR4,4 5 54,2 15 13,8 OIL RUB/м3 NETWORK OF GENERATION CONVERSION CONVERSION OIL GASGAS FLAREFLARE CAPEX INJECTION INTO THE 3 0,1 4,4 GAZPROM5 54,2 15 13,8 RUB/м UNIFIED GAS REINJECTION INTO FLARING TRANSMISSION POWER SIMPLE DEEP BLENDBLEND CAPEXEconomic OIL RESERVOIR GENERATION CONVERSION CONVERSION 0,1 4,40 NETWORK5 OF 54,2 15 13,8 benefitsConstructionRUB/м3 of a flare and feed -2,8pipelines 3 – 6,1 3,6 – 5,2 7,6 – 10,7 19,8 – 20,1 Economic 0 GAZPROM RUB/м3 -2,8 3 – 6,1 3,6 – 5,2 7,6 – 10,7 19,8 – 20,1 CAPEXbenefits 3 0,1 4,4 5 54,2 15 13,8 EconomicRUB/м3 0 -2,8 3 – 6,1 3,6 – 5,2 7,6 – 10,7 19,8 – 20,1 CAPEXbenefitsLost profit from –2,8 from –3 from –2,2 from –2,4 3 –12,2 0 3 0,1 4,4 5 54,2 15 13,8 RUB/м3 from –2,8 from –3 from –2,2 from –2,4 EconomicLost profit tо –22,6 tо –019,8 tо –16,8 tо –14,6 –12,2 0 RUB/м3 -2,8 3 – 6,1 3,6 – 5,2 7,6 – 10,7 19,8 – 20,1 benefits tо –22,6 tо –19,8 tо –16,8 tо –14,6 CAPEX3 LossesRUB/м equal to the flaring fine –2,8 –3 –2,2 –2,4 LostEnvironmental3 profit from0,1 from4,4 from5 from54,2 15 13,8 EconomicRUB/м 0 –12,2 0 benefitsimpactRUB/м3 tо -2,8–22,6 tо –19,8 tо3 – 16,86,1 3,6tо ––14,6 5,2 7,6 – 10,7 19,8 – 20,1 OILOIL Environmental 7,1 0 1,2 1,2 0 0 mt of СО3 equivalent / bcm RUB/м 2 from –2,8 from –3 from –2,2 from –2,4 Lostimpact profit 7,1 0 1,2 1,2 –12,20 0 Economicmt of СО3 equivalent / bcm EnvironmentalRUB/м 2 tо –22,6 tо –019,8 tо –16,8 tо –14,6 benefits United-2,8 Nations 3 – 6,1 3,6 – 5,2 7,6 – 10,7 19,8 – 20,1 PUMPPUMP impactLostRUB/м3 profit fromFramework7,1 –2,8 from0 –3 from1,2 –2,2 from1,2 –2,4 0 0 Data sources UnitedConvention Nations on RUPEC estimates Report on Clean Energy Market Review RUPEC–12,2 estimates RUPEC 0estimates Themt of СО 3rangeequivalent / between bcm fine-related savings and profits from the sale of petrochemical products EnvironmentalRUB/м 2 tоClimateFramework –22,6 Change tо –19,8 tоby –ECOLUR16,8 tоby B2B-Center –14,6 Data sources Convention(UNFCCC) on RUPEC estimates Report on Clean Energy Market Review RUPEC estimates RUPEC estimates impact Climate7,1 Change 0 by1,2 ECOLUR by B2B-Center1,2 0 0 United(UNFCCC) Nations Lostmt of СО profitequivalent / bcm from –2,8 from –3 from –2,2 from –2,4 2 Framework –12,2 0 EnvironmentalRUB/м3 Data sources tоConvention –22,6 on RUPECtо – estimates19,8 Reporttо on – Clean16,8 Energy tоMarket – 14,6Review RUPEC estimates RUPEC estimates ASSOCIATEDASSOCIATED impact Climate7,1 Change 0 by1,2 ECOLUR by B2B-Center1,2 0 0 United(UNFCCC) Nations mt of СО2 equivalent / bcm Framework EnvironmentalData sources Convention on RUPEC estimates Report on Clean Energy Market Review RUPEC estimates RUPEC estimates GASGAS Climate Change by ECOLUR by B2B-Center impactPollutant emissions. ContaminationUnited(UNFCCC)7,1 Nations area within 80–100 km0 from the flare 1,2 1,2 0 0 Framework mt of СО2 equivalent / bcm Data sources Convention on RUPEC estimates Report on Clean Energy Market Review RUPEC estimates RUPEC estimates Climate Change by ECOLUR by B2B-Center (UNFCCC) United Nations Framework Data sources Convention on RUPEC estimates Report on Clean Energy Market Review RUPEC estimates RUPEC estimates Climate Change by ECOLUR by B2B-Center (UNFCCC) REINJECTION HOW IT WORKS After removal from the oil fluids, APG is collected and reinjected into the oil reservoir along INTO OIL RESERVOIR with other by-products. METRICS COMPARISON ACROSS UTILISATION METHODS

INJECTION INTO THE UNIFIED GAS FLARING REINJECTION INTO INJECTION INTO THE POWER SIMPLE DEEP UNIFIEDTRANSMISSION GAS REINJECTIONOIL RESERVOIR INTO GENERATION CONVERSION CONVERSION FLARING TRANSMISSIONNETWORK OF POWER SIMPLE DEEP OIL RESERVOIR NETWORKINJECTIONGAZPROM OFINTO THE GENERATION CONVERSION CONVERSION UNIFIED GAS REINJECTION INTO GAZPROM FLARING TRANSMISSION POWER SIMPLE DEEP OIL RESERVOIR NETWORK OF GENERATION CONVERSION CONVERSION INJECTIONGAZPROM INTO THE UNIFIED GAS REINJECTION INTO FLARING TRANSMISSION POWER SIMPLE DEEP OIL RESERVOIR NETWORKINJECTION OFINTO THE GENERATION CONVERSION CONVERSION CAPEX GAZPROMUNIFIED GAS 3 0,1 REINJECTION4,4 INTO 5 54,2 15 13,8 CAPEXRUB/м FLARING TRANSMISSION POWER SIMPLE DEEP OIL RESERVOIR INJECTION INTO THE GENERATION CONVERSION CONVERSION RUB/м3 0,1 4,4 NETWORK5 OF 54,2 15 13,8 OILOIL UNIFIED GAS REINJECTION INTO GAZPROM FLARING TRANSMISSION POWER SIMPLE DEEP CAPEXEconomic OIL RESERVOIR0 GENERATION CONVERSION CONVERSION 3 0,1 4,4 NETWORK5 OF 54,2 15 13,8 BLEND benefitsAPGRUB/м collection system and gas injection-2,8 wells 3 – 6,1 3,6 – 5,2 7,6 – 10,7 19,8 – 20,1 BLEND Economic potential increase0 in oil re- GAZPROM RUB/м3 covery benefits -2,8 potential increase in oil re- 3 – 6,1 3,6 – 5,2 7,6 – 10,7 19,8 – 20,1 RUB/м3 covery CAPEXEconomic 0,1 4,40 5 54,2 15 13,8 RUB/м3 -2,8 3 – 6,1 3,6 – 5,2 7,6 – 10,7 19,8 – 20,1 benefitsLost profit from –2,8 potentialfrom increase –3 in oil re- from –2,2 from –2,4 3 covery –12,2 0 CAPEXLostRUB/м3 profit fromtо –22,6 –2,8 tоfrom –19,8 –3 fromtо –16,8 –2,2 fromtо –14,6 –2,4 3 0,1 4,4 5 54,2 –12,215 13,80 EconomicRUB/м3 tо –22,6 tо –019,8 tо –16,8 tо –14,6 benefitsThere are practically no publicly available-2,8 data about the economic benefits3 – 6,1 stemming from3,6 – increased 5,2 7,6 oil –recovery 10,7 due19,8 to –the 20,1 CAPEXLostEnvironmental profit from –2,8 potentialfrom increase –3 in oil re- from –2,2 from –2,4 3 0,1 4,4 5 54,2 15 13,8 higherRUB/м3 pressure in the oil reservoir covery –12,2 0 EconomicEnvironmentalimpactRUB/м3 tо –22,67,1 tо –019,8 tо 1,2–16,8 tо 1,2–14,6 0 0 benefitsmt of СО equivalent / bcm -2,8 3 – 6,1 3,6 – 5,2 7,6 – 10,7 19,8 – 20,1 ASSOCIATEDASSOCIATED impact2 7,1 potential increase0 in oil re- 1,2 1,2 0 0 3 covery OILOIL mtRUB/м of СО equivalent / bcm 2 from –2,8 from –3 from –2,2 from –2,4 EconomicEnvironmentalLost profit 0 –12,2 0 benefitsRUB/м3 United-2,8 Nations 3 – 6,1 3,6 – 5,2 7,6 – 10,7 19,8 – 20,1 GASGAS impact tоFramework –22,67,1 potentialtо increase –019,8 in oil re- tо 1,2–16,8 tо 1,2–14,6 0 0 RUB/м3 UnitedConvention Nations on RUPECcovery estimates Report on Clean Energy RUPEC estimates RUPEC estimates Datamt of СО sourcesequivalent / bcm Market Review 2 from –2,8 from –3 from –2,2 from –2,4 PUMPPUMP Lost profit ClimateFramework Change by ECOLUR by B2B-Center Convention on RUPEC estimates Report on Clean Energy RUPEC–12,2 estimates RUPEC0 estimates DataTheRUB/м 3rangesources between fine-related (UNFCCC)savings and profits from the sale of petrochemical productsMarket Review Environmental tоClimate –22,6 Change tо –19,8 tоby –ECOLUR16,8 tоby B2B-Center –14,6 impactLost profit fromUnited(UNFCCC) Nations–2,8 from –3 from –2,2 from –2,4 Framework7,1 0 1,2 1,2 –12,20 0 3 Convention on RUPEC estimates Report on Clean Energy Market Review RUPEC estimates RUPEC estimates DataRUB/мmt of СО sources2 equivalent / bcm Environmental tоClimate –22,6 Change tо –19,8 tоby –ECOLUR16,8 tоby B2B-Center –14,6 impact (UNFCCC)7,1 0 1,2 1,2 0 0 United Nations mt of СО equivalent / bcm Environmental2 Framework Data sources Convention on RUPEC estimates Report on Clean Energy Market Review RUPEC estimates RUPEC estimates impact Climate7,1 Change 0 by1,2 ECOLUR by B2B-Center1,2 0 0 mt of СО equivalent / bcm United(UNFCCC) Nations Environmentally2 neutral solutionFramework provided that APG is utilised in the next extraction cycle Data sources Convention on RUPEC estimates Report on Clean Energy Market Review RUPEC estimates RUPEC estimates Climate Change by ECOLUR by B2B-Center United(UNFCCC) Nations Framework GASGAS Data sources Convention on RUPEC estimates Report on Clean Energy Market Review RUPEC estimates RUPEC estimates Climate Change by ECOLUR by B2B-Center BOOSTERBOOSTER (UNFCCC) INJECTION INTO THE HOW IT WORKS Small amounts of APG can go into the main pipeline to be sold to end consumers as part of natural gas. However, there is a number of technical restrictions imposed on the APG pumped into the gas transmission network (GTN): UNIFIED GAS TRANSMISSION The volume of natural gas transported via the GTN must be significantly higher (by 20–50 times) than that of the injected APG. The APG must be dehydrated and undergo primary treatment to remove aerosols, H2S, mercaptans and most of the heavy . NETWORK OF GAZPROM Gas pumped into the main pipeline must meet the OST 51.40-93 industrial standard, with the gas dehydration and treatment rate being sufficient to eliminate the risk of condensation in the main gas pipeline. This requires that the water and dew points of the gas be 5–7 K below the lowest temperature to which the gas is cooled during its transportation in the pipeline.

GASGAS FLAREFLARE METRICS COMPARISON ACROSS UTILISATION METHODS

INJECTION INTO THE UNIFIED GAS FLARING REINJECTION INTO INJECTION INTO THE POWER SIMPLE DEEP UNIFIEDTRANSMISSION GAS REINJECTIONOIL RESERVOIR INTO GENERATION CONVERSION CONVERSION FLARING TRANSMISSIONNETWORK OF POWER SIMPLE DEEP OILOIL OIL RESERVOIR NETWORKGAZPROM OF GENERATION CONVERSION CONVERSION INJECTIONGAZPROM INTO THE BLENDBLEND UNIFIED GAS REINJECTION INTO FLARING TRANSMISSION POWER SIMPLE DEEP OIL RESERVOIR GENERATION CONVERSION CONVERSION GASGAS TRANSMISSIONTRANSMISSION INJECTIONNETWORK OFINTO THE UNIFIEDGAZPROM GAS REINJECTION INTO FLARING TRANSMISSION POWER SIMPLE DEEP NETWORKNETWORK OFOF GAZPROMGAZPROM OIL RESERVOIR CAPEX NETWORKINJECTION OFINTO THE GENERATION CONVERSION CONVERSION 3 0,1 4,4 GAZPROMUNIFIED GAS5 54,2 15 13,8 CAPEXRUB/м FLARING REINJECTION INTO POWER SIMPLE DEEP SEPARATIONSEPARATION 0,1 4,4 TRANSMISSION5 54,2 15 13,8 3 OIL RESERVOIR RUB/м NETWORKINJECTION OFINTO THE GENERATION CONVERSION CONVERSION UNIFIED GAS REINJECTION INTO GAZPROM Economic FLARING TRANSMISSION POWER SIMPLE DEEP UNITUNIT OIL RESERVOIR0 benefitsDevelopment of a collection system-2,8 and a network of local pipelinesNETWORK to 3deliver – OF 6,1 gas to theGENERATION3,6 main – 5,2 pipeline.CONVERSION7,6 Construction – 10,7 CONVERSION19,8 of a flare– 20,1 CAPEXEconomic 0 3 0,1 4,4 GAZPROM5 54,2 15 13,8 OILOIL benefitsandRUB/м 3feed pipelines (to burn the gas-2,8 off) 3 – 6,1 3,6 – 5,2 7,6 – 10,7 19,8 – 20,1 ASSOCIATEDASSOCIATED RUB/м3 CAPEX 0,1 4,4 5 54,2 15 13,8 RUB/м3 from –2,8 from –3 from –2,2 from –2,4 PUMPPUMP GASGAS EconomicLost profit 0 –12,2 0 benefitsRUB/м3 -2,8 3 – 6,1 3,6 – 5,2 7,6 – 10,7 19,8 – 20,1 CAPEXLost profit fromtо –22,6 –2,8 tоfrom –19,8 –3 fromtо –16,8 –2,2 fromtо –14,6 –2,4 3 –12,2 0 RUB/м3 0,1 4,4 5 54,2 15 13,8 EconomicRUB/м3 tо –22,6 tо –019,8 tо –16,8 tо –14,6 CAPEXbenefitsEnvironmental -2,8 3 – 6,1 3,6 – 5,2 7,6 – 10,7 19,8 – 20,1 Monetisation3 of APG as a common0,1 4,4 5 54,2 15 13,8 RUB/м3 from –2,8 from –3 from –2,2 from –2,4 EconomicLostEnvironmentalimpact profit 7,1 0 1,2 1,2 –12,20 0 mt of СО3 equivalent / bcm impactRUB/м 2 benefits tо -2,8–22,67,1 tо –019,8 tо3 1,2– 16,86,1 3,6tо 1,2 ––14,6 5,2 7,6 –0 10,7 19,8 0– 20,1 mt of СО3 equivalent / bcm EconomicLostRUB/м profit2 from –2,8 from0 –3 from –2,2 from –2,4 United Nations –12,2 0 3 -2,8 3 – 6,1 3,6 – 5,2 7,6 – 10,7 19,8 – 20,1 benefitsEnvironmentalRUB/м Framework –22,6 –19,8 –16,8 –14,6 tоUnited Nations tо Reporttо on Clean Energy tо DataRUB/м 3sources Convention on RUPEC estimates Market Review RUPEC estimates RUPEC estimates impact fromClimateFramework7,1 Change–2,8 from0 –3 fromby1,2 ECOLUR –2,2 fromby B2B-Center1,2 –2,4 0 0 Lost profit Convention on RUPEC estimates Report on Clean Energy RUPEC estimates RUPEC estimates Datamt of СО sourcesequivalent / bcm (UNFCCC) Market Review –12,2 0 ProfitsRUB/м3 2 from the sale of petrochemicalClimate Change products (excluding profits fromby simple ECOLUR conversion)by B2B-Center Environmental tо(UNFCCC) –22,6 tо –19,8 tо –16,8 tо –14,6 impactLost profit from –2,8 from –3 from –2,2 from –2,4 United7,1 Nations 0 1,2 1,2 –12,20 0 mtRUB/м of СО3 equivalent / bcm 2 tоFramework –22,6 tо –19,8 tо –16,8 tо –14,6 EnvironmentalData sources Convention on RUPEC estimates Report on Clean Energy Market Review RUPEC estimates RUPEC estimates impact Climate7,1 Change 0 by1,2 ECOLUR by B2B-Center1,2 0 0 United(UNFCCC) Nations mt of СО equivalent / bcm Environmental2 Framework Data sources Convention on RUPEC estimates Report on Clean Energy Market Review RUPEC estimates RUPEC estimates impact Climate7,1 Change 0 by1,2 ECOLUR by B2B-Center1,2 0 0 United(UNFCCC) Nations mt of СО2 equivalent / bcm Factors in the economic benefitsFramework Data sources Convention on RUPEC estimates Report on Clean Energy Market Review RUPEC estimates RUPEC estimates Climate Change by ECOLUR by B2B-Center United Nations (UNFCCC) Framework Data sources Convention on RUPEC estimates Report on Clean Energy Market Review RUPEC estimates RUPEC estimates Climate Change by ECOLUR by B2B-Center (UNFCCC) POWER GENERATION HOW IT WORKS APG can be used as fuel to generate power at the oil fields or in close proximity.

METRICS COMPARISON ACROSS UTILISATION METHODS

INJECTION INTO THE GASGAS TURBINETURBINE UNIFIED GAS FLARING REINJECTION INTO INJECTION INTO THE POWER SIMPLE DEEP UNIFIEDTRANSMISSION GAS POWERPOWER PLANTPLANT REINJECTIONOIL RESERVOIR INTO GENERATION CONVERSION CONVERSION FLARING TRANSMISSIONNETWORK OF POWER SIMPLE DEEP OIL RESERVOIR NETWORKINJECTIONGAZPROM OFINTO THE GENERATION CONVERSION CONVERSION UNIFIED GAS REINJECTION INTO GAZPROM FLARING TRANSMISSION POWER SIMPLE DEEP OIL RESERVOIR NETWORKINJECTION OFINTO THE GENERATION CONVERSION CONVERSION UNIFIED GAS REINJECTION INTO GAZPROM FLARING TRANSMISSION POWER SIMPLE DEEP OIL RESERVOIR NETWORK OF GENERATION CONVERSION CONVERSION GAZPROM CAPEX INJECTION INTO THE UNIFIED GAS 3 0,1 REINJECTION4,4 INTO 5 54,2 15 13,8 CAPEXRUB/м FLARING TRANSMISSION POWER SIMPLE DEEP 0,1 OIL RESERVOIR4,4 5 GENERATION54,2 CONVERSION15 CONVERSION13,8 OILOIL RUB/м3 NETWORK OF GAZPROMINJECTION INTO THE CAPEXEconomic UNIFIED GAS FLARING0,1 REINJECTION4,40 INTO 5 POWER54,2 SIMPLE15 DEEP13,8 APGRUB/м3 collection system, gas turbine-2,8 units TRANSMISSION3 – 6,1 3,6 – 5,2 7,6 – 10,7 19,8 – 20,1 BLENDBLEND Economicbenefits OIL RESERVOIR 0 NETWORK OF GENERATION CONVERSION CONVERSION RUB/м3 -2,8 3 – 6,1 3,6 – 5,2 7,6 – 10,7 19,8 – 20,1 CAPEXbenefits GAZPROM 3 0,1 4,4 5 54,2 15 13,8 EconomicRUB/м3 0 -2,8 3 – 6,1 3,6 – 5,2 7,6 – 10,7 19,8 – 20,1 benefitsLost profit from –2,8 from –3 from –2,2 from –2,4 3 –12,2 0 RUB/м3 from –2,8 from –3 from –2,2 from –2,4 CAPEXEconomicLost profit tо –22,60,1 tо 4,4–019,8 tо –516,8 tо54,2 –14,6 –12,215 13,80 RUB/м3 benefits tо -2,8–22,6 tо –19,8 tо3 – 16,86,1 3,6tо ––14,6 5,2 7,6 – 10,7 19,8 – 20,1 Profit3 from in-house power generation RUB/м from –2,8 from –3 from –2,2 from –2,4 LostEnvironmental profit –12,2 0 CAPEX3 EconomicEnvironmentalimpactRUB/м tо –22,67,1 tо –019,8 tо 1,2–16,8 tо 1,2–14,6 0 0 RUB/м3 0,1 4,40 5 54,2 15 13,8 mt of СО equivalent / bcm -2,8 3 – 6,1 3,6 – 5,2 7,6 – 10,7 19,8 – 20,1 benefitsLostimpact profit2 from7,1 –2,8 from 0 –3 from1,2 –2,2 from1,2 –2,4 0 0 OILOIL mtRUB/м of СО3 equivalent / bcm –12,2 0 EnvironmentalRUB/м3 2 tо –22,6 tо –19,8 tо –16,8 tо –14,6 Economic United Nations impact Framework7,1 0 1,2 1,2 0 0 UnitedConvention-2,8 Nations on RUPEC estimates Report3 on – Clean 6,1 Energy 3,6 – 5,2 7,6RUPEC – estimates 10,7 19,8RUPEC estimates– 20,1 benefitsDatamt of СО sourcesequivalent / bcm Market Review LostThe range profit2 between profits fromfromClimateFramework utilisation Change–2,8 at thefrom small –3 gas processingfrom byplants ECOLUR –2,2 (excludingfrom byprofits B2B-Center –2,4 from in-house power generation) PUMPPUMP EnvironmentalRUB/м3 Data sources Convention(UNFCCC) on RUPEC estimates Report on Clean Energy Market Review RUPEC–12,2 estimates RUPEC 0estimates andRUB/м 3profits from the sale of petrochemical products (excluding profits from in-house power generation) impact tоClimate –22,67,1 Change tо –019,8 tоby 1,2 –ECOLUR16,8 tоby B2B-Center 1,2–14,6 0 0 United(UNFCCC) Nations mt of СО equivalent / bcm 2 Framework LostData sources profit fromConvention –2,8 on RUPECfrom estimates –3 Reportfrom on Clean –2,2 Energy fromMarket Review–2,4 RUPEC estimates RUPEC estimates Environmental Climate Change by ECOLUR by B2B-Center –12,2 0 RUB/м3 tоUnited(UNFCCC) –22,6 Nations tо –19,8 tо –16,8 tо –14,6 ASSOCIATEDASSOCIATED impact Framework7,1 0 1,2 1,2 0 0 Datamt of СО sourcesequivalent / bcm Convention on RUPEC estimates Report on Clean Energy Market Review RUPEC estimates RUPEC estimates 2 Climate Change by ECOLUR by B2B-Center GASGAS Environmental (UNFCCC) impact United Nations Substantial environmental risks associatedFramework7,1 with CO20 emissions stemming1,2 from large-scale power1,2 generation0 leveraging 0 mt of СО equivalent / bcm Convention on RUPEC estimates Report on Clean Energy RUPEC estimates RUPEC estimates DataAPG sources rich2 in NGLs Market Review Climate Change by ECOLUR by B2B-Center (UNFCCC) United Nations Framework Data sources Convention on RUPEC estimates Report on Clean Energy Market Review RUPEC estimates RUPEC estimates Climate Change by ECOLUR by B2B-Center (UNFCCC) SIMPLE CONVERSION HOW IT WORKS By using small mobile processing units, APG can be separated into methane, and /. Methane is pumped into the gas transmission network, while propane/butane is loaded into tanks and sent to end consumers.

METRICS COMPARISON ACROSS UTILISATION METHODS

INJECTION INTO THE UNIFIED GAS FLARING REINJECTION INTO INJECTION INTO THE POWER SIMPLE DEEP UNIFIEDTRANSMISSION GAS REINJECTIONOIL RESERVOIR INTO GENERATION CONVERSION CONVERSION FLARING TRANSMISSIONNETWORK OF POWER SIMPLE DEEP OIL RESERVOIR GAZPROM GENERATION CONVERSION CONVERSION GTNGTN OFOF GAZPROMGAZPROM INJECTIONNETWORK OFINTO THE ГАЗОТРАНСПОРТНАЯ UNIFIEDGAZPROM GAS ГАЗОТРАНСПОРТНАЯ REINJECTION INTO FLARING TRANSMISSION POWER SIMPLE DEEP OIL RESERVOIR NETWORKINJECTION OFINTO THE GENERATION CONVERSION CONVERSION СЕТЬ ГАЗПРОМА UNIFIED GAS REINJECTION INTO GAZPROM FLARING TRANSMISSION POWER SIMPLE DEEP OIL RESERVOIR GENERATION CONVERSION CONVERSION Метан INJECTIONNETWORK OFINTO THE UNIFIEDGAZPROMINJECTION GAS INTO THE CAPEX REINJECTION INTO FLARING TRANSMISSIONUNIFIED GAS POWER SIMPLE DEEP 3 0,1 REINJECTION4,4 INTO 5 54,2 15 13,8 OIL GASGAS CAPEXRUB/м FLARING OIL RESERVOIR TRANSMISSION GENERATIONPOWER CONVERSIONSIMPLE CONVERSIONDEEP OIL 0,1 OIL RESERVOIR4,4 NETWORK5 OF GENERATION54,2 CONVERSION15 CONVERSION13,8 RUB/м3 GAZPROMNETWORK OF PROCESSINGPROCESSING GAZPROM BLENDBLEND CAPEXEconomic 0 benefitsAPG3 collection system, primary treatment-2,80,1 units, gas4,4 pipelines to connect3 –to5 6,1 the main pipeline,3,654,2 – 5,2transportation7,6 15– 10,7 of finished19,813,8 products– 20,1 EconomicRUB/м 0 PLANTPLANT benefitsRUB/м3 -2,8 3 – 6,1 3,6 – 5,2 7,6 – 10,7 19,8 – 20,1 УСТАНОВКА CAPEX УСТАНОВКА 3 RUB/м 0,1 4,4 5 54,2 15 13,8 EconomicRUB/м3 0 benefitsLost profit from-2,8 –2,8 from –3 from3 – 6,1–2,2 from3,6 – –2,45,2 7,6 – 10,7 19,8 – 20,1 СЕПАРАЦИИ CAPEX –12,2 0 RUB/м3 from0,1 –2,8 from4,4 –3 from5 –2,2 from54,2 –2,4 15 13,8 CAPEXEconomicLostRUB/м3 profit tо –22,6 tо –19,8 tо –16,8 tо –14,6 3 0,1 4,40 5 54,2 –12,215 13,80 RUB/м3 –22,6 –19,8 –16,8 –14,6 benefits tо-2,8 tо tо3 – 6,1 3,6tо – 5,2 7,6 – 10,7 19,8 – 20,1 Monetisation3 of dry stripped gas (DSG) and NGLs as fuel EnvironmentalRUB/м from –2,8 from –3 from –2,2 from –2,4 EconomicLost profit 0 –12,2 0 EconomicEnvironmentalimpactRUB/м3 7,1 0 1,2 1,2 0 0 benefits tо -2,8–22,6 tо –019,8 tо3 – 16,86,1 3,6tо ––14,6 5,2 7,6 – 10,7 19,8 – 20,1 OILOIL mt of СО equivalent / bcm -2,8 3 – 6,1 3,6 – 5,2 7,6 – 10,7 19,8 – 20,1 benefitsimpact3 2 LostRUB/м profit from7,1 –2,8 from 0 –3 from1,2 –2,2 from1,2 –2,4 0 0 mtRUB/м of СО3 equivalent / bcm –12,2 0 RUB/м3 2 Environmental tоUnited –22,6 Nations tо –19,8 tо –16,8 tо –14,6 PUMPPUMP impact Framework7,1 –2,8 0 –3 1,2 –2,2 1,2 –2,4 0 0 LostData sources profit fromUnitedConvention Nations on RUPECfrom estimates Reportfrom on Clean Energy fromMarket Review RUPEC estimates RUPEC estimates mt of СО equivalent / bcm fromClimateFramework Change–2,8 from –3 fromby ECOLUR –2,2 from –2,4 –12,2 0 LostProfitsRUB/м3 profit2 from the sale of petrochemical products (excluding profits from simple conversion)by B2B-Center EnvironmentalData sources tоConvention(UNFCCC) –22,6 on RUPECtо – estimates19,8 Reporttо on – Clean16,8 Energy tоMarket – 14,6Review RUPEC–12,2 estimates RUPEC 0estimates RUB/м3 impact tоClimate –22,67,1 Change tо –019,8 tоby 1,2 –ECOLUR16,8 tоby B2B-Center 1,2–14,6 0 0 United(UNFCCC) Nations mt of СО equivalent / bcm Environmental2 Framework EnvironmentalData sources Convention on RUPEC estimates Report on Clean Energy Market Review RUPEC estimates RUPEC estimates ASSOCIATEDASSOCIATED impact Climate7,1 Change 0 by1,2 ECOLUR by B2B-Center1,2 0 0 impact United(UNFCCC)7,1 Nations 0 1,2 1,2 0 0 mt of СО2 equivalent / bcm Framework mt of СО equivalent / bcm Convention on RUPEC estimates Report on Clean Energy RUPEC estimates RUPEC estimates GASGAS Data sources2 Market Review Climate Change by ECOLUR by B2B-Center United(UNFCCC) Nations UnitedFramework Nations Data sources ConventionFramework on RUPEC estimates Report on Clean Energy Market Review RUPEC estimates RUPEC estimates Data sources ClimateConvention Change on RUPEC estimates Reportby on ECOLUR Clean Energy byMarket B2B-Center Review RUPEC estimates RUPEC estimates ТОПЛИВНЫЙFUELFUEL GASGAS ГАЗ Climate(UNFCCC) Change by ECOLUR by B2B-Center (UNFCCC) Пропан,Propane, бутан butane DEEP CONVERSION HOW IT WORKS APG is delivered to large gas processing plants, where it is separated into methane (dry stripped gas) and natural gas liquids. The dry gas is fed to the main gas transmission network, while NGLs (unlike in the simple conversion scenario) are sent for further processing to manufacture a wide range of petrochemical products.

METRICS COMPARISON ACROSS UTILISATION METHODS

INJECTION INTO THE UNIFIED GAS REINJECTION INTO FLARING TRANSMISSION POWER SIMPLE DEEP OIL RESERVOIR GASGAS GTNGTN OFOF GAZPROMGAZPROM NETWORK OF GENERATION CONVERSION CONVERSION INJECTIONGAZPROM INTO THE UNIFIED GAS REINJECTION INTO PROCESSINGPROCESSING FLARING TRANSMISSION POWER SIMPLE DEEP OIL RESERVOIR NETWORK OF GENERATION CONVERSION CONVERSION PLANTPLANT GAZPROM INJECTION INTO THE UNIFIED GAS REINJECTION INTO CAPEX FLARING TRANSMISSION POWER SIMPLE DEEP OILOIL 0,1 OIL RESERVOIR4,4 5 GENERATION54,2 CONVERSION15 CONVERSION13,8 RUB/м3 INJECTIONNETWORK OFINTO THE UNIFIEDGAZPROM GAS FLARING REINJECTION INTO INJECTION INTO THE POWER SIMPLE DEEP BLENDBLEND UNIFIEDTRANSMISSION GAS Highest CAPEX to develop comprehensive infrastructure:REINJECTIONOIL RESERVOIR INTO APG collection system, compressorGENERATION stationsCONVERSION and gas processingCONVERSION CAPEXEconomic FLARING TRANSMISSIONNETWORK OF POWER SIMPLE DEEP OIL RESERVOIR0 capacities,RUB/м3 transportation of DSG 0,1and NGLs, expenses4,4 associatedGAZPROM with further5 processingGENERATION54,2 CONVERSION15 CONVERSION13,8 benefits -2,8 NETWORK3 – OF 6,1 3,6 – 5,2 7,6 – 10,7 19,8 – 20,1 RUB/м3 GAZPROM Economic 0 -2,8 3 – 6,1 3,6 – 5,2 7,6 – 10,7 19,8 – 20,1 CAPEXbenefitsLost profit from –2,8 from –3 from –2,2 from –2,4 3 0,1 4,4 5 54,2 –12,215 13,80 RUB/м3 tо –22,6 tо –19,8 tо –16,8 tо –14,6 CAPEX Average economic benefits: monetisation0,1 of methane4,4 (dry stripped gas) 5as a fuel gas, monetisation54,2 of NGLs15 as a raw material13,8 for EconomicLostEnvironmentalRUB/м3 profit from –2,8 from –3 from –2,2 from –2,4 CAPEXthe petrochemical industry with subsequent manufacturing0 of finished products from polymers and synthetic–12,2 rubbers. Highest0 RUB/м3 -2,80,1 4,4 3 –5 6,1 3,654,2 – 5,2 7,6 15– 10,7 19,813,8 – 20,1 OILOIL benefitsimpactRUB/м –22,6 –19,8 –16,8 –14,6 economic benefits for the businesstо 7,1 and governmenttо 0 tо 1,2 tо 1,2 0 0 mtRUB/м of СО3 equivalent / bcm Economic2 0 EconomicbenefitsEnvironmental -2,8 3 – 6,1 3,6 – 5,2 7,6 – 10,7 19,8 – 20,1 PUMPPUMP United Nations 0 RUB/м3 benefitsLostimpact profit fromFramework-2,87,1 –2,8 from 0 –3 from3 1,2– 6,1–2,2 from3,61,2 – –2,45,2 7,6 –0 10,7 19,8 0– 20,1 Data sources Convention on RUPEC estimates Report on Clean Energy Market Review RUPEC–12,2 estimates RUPEC 0estimates RUB/мmt of СО3 equivalent / bcm 2 tоClimate –22,6 Change tо –19,8 tоby –ECOLUR16,8 tоby B2B-Center –14,6 (UNFCCC) Lost profit from –2,8 from –3 from –2,2 from –2,4 United Nations –12,2 0 EnvironmentalLostProfitsRUB/м3 profit from the sale of petrochemicalfromtоFramework –22,6 –2,8 products tоfrom(excluding –19,8 –3 profits fromfromtо simple–16,8 –2,2 conversion)fromtо –14,6 –2,4 ASSOCIATEDASSOCIATED Data sources Convention on RUPEC estimates Report on Clean Energy Market Review RUPEC–12,2 estimates RUPEC 0estimates NATURAL GAS LIUIDS 3 NATURAL GAS LIUIDS impactRUB/м tоClimate –22,67,1 Change tо –019,8 tоby 1,2 –ECOLUR16,8 tоby B2B-Center 1,2–14,6 0 0 (UNFCCC) mt of СО equivalent / bcm GASGAS Environmental2 impactEnvironmental United7,1 Nations 0 1,2 1,2 0 0 mt of СО equivalent / bcm impact2 Framework7,1 0 1,2 1,2 0 0 Data sources Convention on RUPEC estimates Report on Clean Energy Market Review RUPEC estimates RUPEC estimates mt of СО equivalent / bcm 2 Climate Change by ECOLUR by B2B-Center United(UNFCCC) Nations Framework Manufacturing Data sources UnitedConvention Nations on RUPEC estimates Report on Clean Energy Market Review RUPEC estimates RUPEC estimates ClimateFramework Change by ECOLUR by B2B-Center Data sources Convention(UNFCCC) on RUPEC estimates Report on Clean Energy Market Review RUPEC estimates RUPEC estimates a wide range Climate Change by ECOLUR by B2B-Center of products (UNFCCC) METRICS CALCULATION PRINCIPLES AND DATA SOURCES

FLARING REINJECTION INTO INJECTION INTO POWER GENERATION SIMPLE DEEP OIL RESERVOIR THE UNIFIE GAS CONVERSION CONVERSION TRANSMISSION NETWORK OF GAZPROM

CAPEX RUPEC data for CAPEX RUBEC data for CAPEX RUBEC data for CAPEX Calculated based on the per RUBEC data for CAPEX RUBEC data for CAPEX required to build a flaring required to build compressor required to build compressor unit cost of power in relation required to build compressor required to build compressor system with a capacity of 1.5 and pipeline facilities and pipeline facilities to CAPEX, adjusted for gas and pipeline facilities, inter- and pipeline facilities, inter- bcm of gas per annum consumption per unit of nal CAPEX estimates for a nal CAPEX estimates for a power (as per the Energosiste- small gas fractionation unit gas processing plant and ma Magazine, first issue, petrochemical production 2010) facilities

Implementation Under one year: Under one year: Under one year: Under one year: 2–3 years: 5 years: installation of a flaring installation of pipelines and installation of pipelines and installation of pipelines, com- construction and launch of construction and launch of the period system, pipelines and com- compressors compressors pressors and a gas turbine the pipeline network and gas pipeline network, gas process- pressors unit processing plants ing plants and petrochemical production facilities

Economic benefits Average economic benefits: No average economic No average economic No average economic Conversion of APG into low Full APG conversion into market- losses equal to the flaring losses. The direct impact on losses. The economic bene- losses. The economic bene- value-added marketable able products: basic polymers fine (Sergey Donskoy, Im- oil production cannot be cal- fits are related to the sale of fits are related to the sale of products (DSG, LPG and (polyethylene and polypropylene) provements in efficiency of culated. Lost profit / unin- all APG to the GTN of Gaz- power generated at in-house stable gas naphtha (SGN) and elastomers (polybutadiene) associated petroleum gas curred losses: the range be- prom at the price of DSG facilities produced through gas frac- made from monomers produced utilisation in Russia) tween profits from deliveries tionation) through pyrolysis of fractions after to the gas transmission net- APG fractionation work and profits from the sale of petrochemical prod- ucts

Lost profit Lost profit is calculated as Lost profit is calculated as Lost profit is calculated as Lost profit is calculated as Lost profit is calculated as No lost profit (deeper conversion the range of differences be- the range of differences be- the range of differences be- the range of differences be- the difference between the is impossible under the chosen tween the economic benefits tween the economic benefits tween the economic benefits tween the economic benefits economic benefits of deep model) of five other potential utilisa- of four other potential utilisa- of three other potential utili- of two other potential utilisa- conversion into basic poly- tion methods and the nega- tion methods and the eco- sation methods and the eco- tion methods and the eco- mers and elastomers and the tive economic benefits of nomic benefits of reinjection nomic benefits of injection nomic benefits from the sale economic benefits from the flaring (fine) into the unified GTN of Gaz- of power generated at sale of hydrocarbon prod- prom in-house facilities ucts, including DSG, LPG and SGN

Environmental impact Calculated based on the typi- Environmental impact is Calculated based on the typi- Calculated based on the typi- Typical emissions of green- Typical emissions of greenhouse cal emissions from APG flar- deemed to be zero cal emissions from gas flar- cal emissions from gas flar- house gases CO2, CH4 and gases CO2, CH4 and NOX from

ing: greenhouse gases CO2, ing: greenhouse gases CO2, ing: greenhouse gases CO2, NOX from gas processing gas processing plants and petro-

CH4 and NOX, inclusive of CH4 and NOX, inclusive of the CH4 and NOX, inclusive of the plants and petrochemical chemical production facilities the greenhouse effect ratios greenhouse effect ratios of greenhouse effect ratios of production facilities (RUPEC (RUPEC data), inclusive of the of each gas (data of the each gas (data of the United each gas (data of the United data), inclusive of the green- greenhouse effect ratios of each United Nations Framework Nations Framework Conven- Nations Framework Conven- house effect ratios of each gas Convention on Climate tion on Climate Change (UN- tion on Climate Change (UN- gas Change (UNFCCC)) FCCC)) FCCC))